Idea 272, or Visualize Seething Rage Since driving a few tollroads during this summer trip, I am reminded of the costs of collecting tolls. The Federal income tax, in comparison, seems very cheap to collect, because the Feds themselves don't collect it, they make employers collect it for them. The Feds don't want to do it themselves and they're worried that private collection agencies would be heavyhanded. Employers are stuck with the job. Taxpayers aren't excited about someone else collecting from them either. They like the Christmas-y feeling of getting their overpayment rebated to them, which can only happen with a system that withholds during the year. They won't be sold on the notion of making out the check for the whole tax year's amount unless they see the real opportunity cost of payroll withholding---they need to see a little Christmas every paycheck. And they won't get agitated about high tax levels unless they not merely understand the opportunity cost, but feel it like the proverbial boot in the face. In short, popular support for a drastic reduction (do not use the term "reform") in Federal income taxes will not materialize unless we can convert at least some employer withholding into employee investment. Let's transpose the little-pain-every-paycheck with the Santy-Claus-in-April, into a little Christmas every paycheck and the big pain in April. We can show the opportunity cost, in real dollars and cents, using commercial, off-the-shelf systems available now, and we can make it politically palatable to practically all of the stakeholders by aiming it at lower-income brackets first. Because women are more prevalent in the lower-income brackets, or so I am told, the remainder of this post refers to the taxpayer in the feminine gender. End employer withholding, by replacing it with employer withholding, er, with a twist. Instead of the Federal income tax withheld, the exact same amount is directed to an employer-administered savings account, much like a 401(k). Surely many good vehicles are available to receive these monies, with the understanding that they will be cashed out on a known date; the problem will be choosing vehicles where the monies will be out of the reach of tampering and won't crash during the tax year. The employee owns the dividends and income this money generates, tax-free now and forever, as it waits for April. The employee also gets periodic spreadsheets showing the dividends and income that the money makes, and the taxes she paid in prior tax years. At income tax return time, the employee gets one check, which she must write from that account, payable to Uncle Sugar for whatever amount the 1040 says. It's like a Christmas Club, but the gift is for Uncle Sugar. This is important: the check must be written in longhand. Mechanically printed checks and electronic transfers are prohibited. I want to see the salty stains of sweat and tears on that paper check from the effort of writing out the date, then Pay to the Order Of, the amount in digits, the amount in words, watching those dollars going away, away. Not because I'm a brutal prick, but because this program must brew seething rage to be successful at its long-term goal. If she owes less tax than she saved, she keeps the difference. Roll it into a Roth or waste it. If she didn't have enough withheld, she has dividends and interest to soften the blow. Maybe she owes more than that. Pay closer attention next tax year, which is already in progress. And remember: "seething rage." Who'd you write that check out to? To make the proposal easier to slide past a reluctant Congress, the program has to be narrowly aimed at a small group to start. Let's say that only taxpayers whose total tax (line 40) was less than three thousand dollars for each of the last three tax years can escape employer withholding and join the Anti-Christmas Club. It's for the Children! The real "fat cats," so to speak, have already escaped withholding the hard way: they're making quarterly payments to the IRS so this program doesn't benefit them. By Democrat Party logic, proponents of this withholding-escape plan can claim it would help single mothers and their kids because it wouldn't benefit "the rich." Gradually ratchet this threshold figure upward, by indexing it against the Federal minimum wage and first-class postage. Every time the bastards increase either one, multiply the increase by one hundred and add that increase to the threshold (minimum wage increases by a buck, the threshold goes up by one hundred bucks). OK, seriously, I'd rather index the threshold against the local cost of living or median income. Rising tide lifting all boats, and all that. Sweeten the deal for the employers, since we're still saddling them with compliance costs. I'm not sure how to do this, do please visit the comment box below if you have a suggestion. Maybe, every employee enrolled in the Anti-Christmas Club is counted as a member of the 401(k) for the purpose of admitting "highly compensated employees." Most companies seem to struggle for the low-end participants so they can include more high-end ones. Throw them a bone. April is the cruelest month As an added benefit, this proposal gives many more taxpayers the perverse incentive to wait until the very last minute to file their returns, further congesting the IRS and Postal Service. Since the money never really leaves her until she writes that painful check (visualize seething rage), it doesn't matter whether she owes or not---she'll sit on the bucks and let them earn until the last possible moment. "I've got the owner of Motorola aboard this bus!" Many stocks take a price dip in April because enough of their holders have to sell something to cover their tax liability. Wouldn't it be cool if single moms, with their 1040's made out to the cent, go cruising for stock bargains at about that time? Editor's note: I choose not to number this idea "666"---an Anti-Christmas Club plan, anti-Christ, number of the Beast, six six six, get it? It just wouldn't have worked.